WHICH one you should prioritize – quality or productivity? Take this question for a moment that has failed many self-proclaimed quality and productivity “experts” for their discourse resulting in clear, but incorrect answer. Here’s the instruction: Your answer should be either be “quality first” or “productivity first” with no conditions attached. Also, the answer “it depends” is not acceptable, because this challenge is not for lawyers or economists who are trained to confuse people.
Further, there should be no “both” or any middle-of-the-road answers because you don’t want to suffer the fate of dead cats and dogs. Understood?
After an internal soul-searching, using an internally-developed problem-solving technique, your top management discovered that your organizational problem is caused mainly by the poor quality of your products and poor labor productivity, except that you don’t know what, when, and how to start. You checked with Consultant “A” who tells you to reduce the number of product defects through a campaign slogan – “zero defect.”
You’re not satisfied. That’s why you asked Consultant “B” for a second opinion. He prescribes that you should focus on improving labor productivity and recommends a “productivity improvement” program. Now, the contrasting proposals put you in a total dilemma.
Both consultants claim on paper that they’re experts in the field. One boasts with a macho, elitist title of Six Sigma, while the other claims he studied in Japan and wrote several books on the subject of Kaizen and Lean. The two consultants have different work experience and perspectives that explain on the differences between their proposals. They charge a reasonable amount of professional fees, which could be a worthwhile investment, if only to solve a multi-million peso business issue.
In your frustration, you fired your manufacturing director for incompetence. While you’re looking for a replacement, you’re faced with an urgent decision. And so, which one would you choose? Consultant “A” who prescribes solving the poor quality of your products or Consultant “B” who tells you that you should start first with labor productivity? Take one minute for you to reflect on the right answer.
Use your stock knowledge or whatever bias you have.
Then, lock it in your mind before proceeding to read the rest of this article. Ready? OK, let’s proceed.
Here’s the meat of the case. XYZ Enterprise is a factory making a special component for mobile phones. Let’s call that “special component” as Product 321. It has a defect rate of 20 per cent that could be traced to many factors, including a complicated work process, human error, machine fatigue, poor employee morale, unreliable suppliers, defective materials, or a combination of all of the above.
In fairness, at least XYZ knows how to measure their defects as they know they’re producing 100 units of Product 321 a day, but can only pass on 80 quality units to their customers. The typical 20 defective pieces are displayed near the exit on a small table near the attendance monitoring machine for all workers to understand the problem.
On top of the table is a notice that reads like this: “The value of this defect is P22,800 per piece or P456,000 each day or close to ten million pesos a month. We have to solve this problem immediately!” But no one appears to be listening as the workers don’t know what to do. Management knows they can’t send these defective pieces to their customers who can sue the factory for damages and charge them P500,000 for every day of delay.
You’ve not yet chosen the replacement of the dismissed factory director despite the 15 job candidates that were lined-up by the HR department. As a temporary control measure, XYZ’s ad hoc management committee authorized the hiring of 20 “endo” workers to visually check each and every work process of another set of “endo” workers who are using a sophisticated defect detection equipment. It was a bitter, costly pill that XYZ swallowed. And the problem continues without the new manufacturing director in sight.
In the meantime that XYZ can’t control the 20 per cent defect rate, its owners has increased the productivity rate by 30 per cent, to meet the increasing demand of customers for Product 321. With that, XYZ is now forced to produce 130 units a day, at times, coercing the workers to work overtime, resulting in 26 defective units, but produced 104 quality standard units per day, which are more than what the customers require in a day.
In conclusion, if you will prioritize productivity to meet customer demand, more units can be produced every day, but at the same time, the cost of defective products will also increase. This time, the 20 percent defect rate means an increase from P456,000 (P22,800 multiplied by 20 units) to P592,800 (P22,800 multiplied by 26 units) per day.
The answer is clear. You’ve to take a good look at your quality first, before deciding to improve productivity. Therefore, superfluous knowledge about quality and productivity is worthless, if you don’t know the difference between the two. The next time you’re faced with a consultant, consider killing him not with kindness but with this basic test like this.
Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Send feedback to firstname.lastname@example.org or follow him on Facebook, LinkedIn or Twitter for his random management thoughts on Elbonomics.